Difference between a Public Company and a Private Company

Some of the major distinction between a public company and a private company are as follows:

1. Minimum number of members:

The minimum number of persons required to form a ‘ public company is seven whereas in a private company it is only two.

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2. Maximum number of members:

There is no maximum limit on the members of a public company but a private company cannot have more than 50 members excluding employees and ex-employees of the company.

3. Restriction on name:

The name of a public company must end with the word, “limited” But in the case of a private company the word private limited must be used at the end of the name.

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4. Commencement of business:

A public company can commence its business only after getting the certificate of commencement of business. But a private company can commence its business as soon as it is incorporated.

5. Invitation to the public:

A public company must issue a prospectus or statement in lieu of prospectus for inviting public to subscribe to its shares or debentures. A private company on the other hand cannot issue such invitation to the public.

6. Transferability of shares:

There is no restriction on the transfer of shares in the case of a public company whereas the articles of a private company must restrict its right to transfer its shares.

7. Number of its directors:

A public company must have at least three directors whereas a private company must have at least two directors.

8. Restrictions on the appointment of directors:

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A director of a public company shall file with the Registrar consent to act as a director or sign the memorandum of association or enter into a contract for their qualification shares. The directors of a private company need not do so.

9. Statutory meeting:

A public company must hold a statutory meeting and file with the Registrar a statutory report. But a private company has no such obligations.

10. Quorum:

If the articles of a company do not otherwise provide five members personally present in the case of a public company are quorum for a meeting of the company. It is two in the case of a private company.

11. Issue of share warrants:

A public company can issue share warrants but such a right is denied to a private company.

12. Further issue of capital:

A public company proposing further issue of shares must offer them to the existing members. A private company is free to allot new issue to outsiders.

13. Managerial remuneration:

Total managerial remuneration in the case of a public company cannot exceed 11% of the net profits but in the case of inadequacy of profits a minimum of? 50,000 can be paid. These restrictions do not apply to a private company.